April 11, 2023
Cross-Border Reverse Mergers: A US IPO Alternative for Foreign Companies
This Cooley blog discusses how reverse mergers with existing US public companies are becoming an increasingly popular way for foreign companies to access the US capital markets. Here’s the intro:
With the US initial public offering markets continuing to remain largely closed, and special purpose acquisition company combinations being costly and complex, there’s a new kid in town for foreign companies looking to go public in the US: reverse mergers. We’ve seen a material increase in reverse merger transactions – particularly with cross-border elements, and we expect many more will follow given current market conditions. Cross-border reverse mergers are gaining momentum, particularly in the life sciences sector, due to the increasing number of US public companies with healthy cash levels but poor or failed product pipelines, proving to be a viable path to going public in the US in the near term.
The blog makes it clear that these aren’t the reverse mergers that most dealmakers are familiar with, where the dude with a chain of three video game stores opts to merge with the empty shell of a former Uranium mining company. Instead, we’re talking about real companies sitting on a bunch of cash.
The blog goes on to discuss key factors that foreign companies should consider in determining whether a cross-border reverse merger makes sense for them. These include structuring & certainty issues, tax considerations, due diligence & integration, financing & financial considerations and US public company readiness.
– John Jenkins